Existing home sales in the United States suffered its largest annual fall in the last three years due to limited listings – but there are signs the tide is turning.
Total existing-home sales of single-family homes, townhomes, condominiums and co-ops, fee 3.2% in January to a seasonally adjusted annual rate of 5.38million. This was from a downwardly revised 5.56million in December 2017.
Sales are 4.8% below a year ago. This was the largest annual decline since August 2014. Sales are now at their slowest pace since September 2017, on 5.37 million. That is according to the National Association of Realtors data.
Role of limited listings on prices
Lawrence Yun, NAR chief economist, explains the role of limited listings on prices. “The utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the U.S. last month.
“While the good news is that Realtors in most areas are saying buyer traffic is even stronger than the beginning of last year, sales failed to follow course and far lagged last January’s pace. It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.”
The median existing-home price for all housing types in January was $240,500, up 5.8% from January 2017’s $227,300. January’s price increase marks the 71st straight month of year-over-year gains.
Total housing inventory at the end of January rose 4.1% to 1.52million existing homes available for sale. However, it is still 9.5% lower than a year ago at 1.68million. The figure has fallen year-over-year for 32 consecutive months. Unsold inventory is at a 3.4-month supply at the current sales pace compared with 3.6 months a year ago.
“Another month of solid price gains underlines this ongoing trend of strong demand and weak supply. The underproduction of single-family homes over the last decade has played a predominant role in the current inventory crisis that is weighing on affordability. However, there’s hope that the tide is finally turning.
Jump in new house construction
“There was a nice jump in new home construction in January and homebuilder confidence is high. These two factors will hopefully lay the foundation for the building industry to meaningfully ramp up production as this year progresses.
“The gradual uptick in wages over the last few months is a promising development for the housing market, but there’s risk these income gains could be offset by the recent jump in mortgage rates. That is why the pace of added new and existing supply in the months ahead is worth monitoring. If inventory conditions can improve enough to cool the swift price growth in several markets, most prospective buyers should be able to absorb the higher borrowing costs.”
Properties typically stayed on the market for 42 days in January, which is up from 40 days in December 2017. Even so, it is down from a year ago at 50 days. Almost half (43%) of homes sold in January were on the market for less than a month.
Early spring buying season
NAR President Elizabeth Mendenhall, says Realtors® in several markets say the spring buying season is starting early this year. “With demand exceeding supply in most areas, competition will only heat up in the months ahead. Beginning the home search now could lead to a successful and less stressful buying experience.”
All-cash sales reached 22% of transactions in January, up from 20% in December 2017 but down from 23% a year ago. Individual investors, who account for many cash sales, purchased 17% of homes in January, up from 16% both last month and a year ago.
Single-family home sales declined 3.8% to a seasonally adjusted annual rate of 4.76million in January from 4.95million in December. They are now 4.8% below the 5million pace a year ago. The median existing single-family home price was $241,700 in January, up 5.7% from January 2017.
Existing condominium and co-op sales rose 1.6% to a seasonally adjusted annual rate of 620,000 units in January, but are still 4.6% below a year ago. The median existing condo price was $231,600 in January, which is 7.1% above a year ago.